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What's next for crypto: We're hosting a live discussion Wednesday on all things crypto, where you can hear several viewpoints on risk management, security flaws, regulation, and other trends amid this difficult period for the industry. Register here.
Sneak peek: What's being done with all the data generated by connected cars? We'll give our latest mobility tech research a wide release Monday, but you can get early access here.
AI can write code? Our latest emerging space brief sizes up VC activity for AI-powered code completion and breaks down how these tools work, some of their limitations, and what the future holds for the nascent sector. Read it here. | | | | | |
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| As e-commerce grows, new enablement technologies are gaining momentum | | The e-commerce ecosystem has advanced by leaps and bounds since the earliest indications of the industry percolated in the 1990s. In Q3, US e-commerce sales alone were forecasted to exceed $1 trillion—about 20% of all retail and commercial sales activity—a result of diverse and complex enablement technologies that span business-to-business and direct-to-consumer commerce use cases and are interwoven with emerging fintech and supply chain innovations. E-commerce startups raised $4.4 billion in Q3 (down 34% QoQ), bringing total VC activity in the sector to $20 billion YTD. As more transactions are handled digitally, some of the early technological innovations are maturing while new enablement technologies are simultaneously demonstrating significant traction and growth potential. Subsegments with novel use cases include livestream & social commerce and virtual & augmented reality shopping experiences. Simultaneously, many retailers are moving away from monolithic tech stacks and toward composable commerce solutions that support speed and flexibility.  | | PitchBook clients get access to our e-commerce market map. | The rush to provide buyers with individualized, instantaneous, and frictionless buying experiences is a core growth driver of e-commerce technology. This trend has been front-of-mind for merchants throughout the last decade, but the COVID-19 pandemic provided step-function growth in digitization and e-commerce adoption when merchants were forced to establish a robust online presence overnight. Amid challenging macroeconomic conditions, like persistent inflation and shaky growth, tech-based solutions are helping vendors take market share in a world of incumbent technology titans, an evolving privacy landscape, siloed data, rising customer acquisition costs, and snarled supply chains. Our first-ever e-commerce report examines trends for VC investment flow, highlights emerging opportunities, and discusses prominent risks for investors to consider. For more data and analysis, download a free preview of our Q3 E-commerce Report. PitchBook clients can download the full research here. We welcome any questions or comments. | | | | | | | | | Retail investors learn the hard way about private market illiquidity | | In the spotlight I wrote for our Q3 Global Private Market Fundraising Report, I focused on how our dry powder data is a vast understatement of the capital competing for investments.
Since we report only on call-down structures, the fund structures becoming more popular with retail investors—like the Blackstone Real Estate Income Trust and other permanent capital funds—aren't included in our dry powder figures.
In the report, I wrote: "Many of the big private market players have announced initiatives to try to capture this part of the market, recognizing that with the decline of pensions, this may be the only real source of growth in private markets—if they can do it in a way that does not lead to a liquidity crisis when these newer LPs find themselves without the liquidity at the exact moment when they want it most."
Since that writing, it has been widely reported that Blackstone and others such as Starwood Capital Group, CBRE Investment Management, and BlackRock are limiting withdrawals from their real estate funds. Like a bank run, word that investors cannot get their money out is causing more investors to ask.
The reason for the limits is that these funds are invested in illiquid assets—like office buildings, warehouses, and apartments. Institutional investors have long accepted the need to utilize private funds, often with 10-year horizons, to invest in illiquid assets like real estate, private equity, and venture capital. This fund structure is a good match between the time horizon of the fund and the horizon of the underlying investments.
Individual investors are often concerned about liquidity, however, so in order to tap that source of funding, fund managers created structures with liquidity provisions that allowed for some ability to redeem assets on a regular, often quarterly, basis.
This structure has kept investors and fund managers happy in recent years when redemption requests have come from a small minority of investors or net cash flows are significantly positive as investors providing funding vastly outpace those hoping to redeem.
Should a large number of investors decide this is no longer the asset class or vehicle for them, the fund manager is forced to either sell the underlying assets of the fund at an inopportune moment or to limit the redemptions allowed.
On balance, it may be good for the investors attempting to join a wave of redemptions to slow the outflows and not lock in market declines. But when investors are told they can't have their money back, they are not usually predisposed to accept the explanation that it's for their own good.
In its Q3 earnings release, Blackstone said that the assets in its perpetual capital funds were at $359.6 billion, up 83% year-over-year.
While limiting distributions will keep that number high for a while, it seems like this may be a significant moment for the retail-asset-gathering movement, assuming individual investors digest the appropriate message: if they are not truly long-term investors, they should probably avoid investing in any vehicle with long-term investments, regardless of the liquidity provisions.
To read our spotlight, "Why private market dry powder figures are understated," download our global fundraising report here.
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Who Benefits from Insider-Led Rounds?
In 2022, new financing rounds led by existing investors—known as insider-led rounds—had a median deal size of $14.1 million.
That's nearly triple the median for other rounds.
|  | | Insider-led rounds have become more frequent at all stages. | | | |
Our research explores the influence of existing investors on the fundraising process, deal size, valuation step-ups, and overall returns for VC firms and startup founders: | | | | | |
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It's hard to find good news about crypto these days.
The sudden collapse of FTX has triggered a tidal wave of negative sentiment across the whole vertical, causing the already skeptical public to shy away.
But is the news really all bad? It depends on where you look.
Our inaugural Crypto Report examines the state of the vertical and its various segments in Q3, charting deal activity and developing opportunities.
The long and short of it—crypto is far from done: | | | | | | VC funding for the supply chain tech industry continued to ebb in Q3, as startups worldwide raised $3.3 billion across 188 deals—YoY declines of 77.2% and 55.7%, respectively.
Elsewhere, exit volume is slightly up on a quarterly basis, while exit value remains way down.
Our new Supply Chain Tech Report explores VC trends in the space and spotlights notable companies DLT Labs, Phantom Auto, and Lumachain.
The research also highlights opportunities like blockchain technology as well as autonomous warehouse and delivery operations, as startups that aim to improve tracking and visibility in the supply chain—shortcomings exposed by the pandemic and recent geopolitical pressures—could see a tailwind: | | | | | |
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DACH dealmaking faltered in Q3, as macroeconomic conditions seemed to finally catch up with PE & VC in Germany, Switzerland, and Austria.
Our DACH Private Capital Breakdown explores exactly how the industries are coping with tighter monetary policy and other changes to the financial landscape: - PE could still be on course for a record year, with €75.7 billion invested across 818 deals this year through Q3.
- While VC fundraising has been strong, PE raised just five funds in the first three quarters of the year for a total of €2 billion.
- Exit activity is down from last year and VC exits could hit their lowest annual total since 2018.
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The window for an economic soft landing has narrowed.
While core inflation has slowed modestly, it has also broadened into more persistent areas.
Core growth drivers such as consumer spending and non-residential business investment have slowed.
Our senior quantitative analysts hosted a live discussion this week to discuss the current macro environment and the challenging road ahead for private equity:
Watch the replay | | | | | |
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Our insights and data featured in the press: - "The lack of clear regulation and guidance remains one of the crypto industry's greatest concerns and limiting factors." [Reuters]
- The share of global VC deals involving AI startups has gone up since mid-2021 and more than two dozen AI unicorns have been newly minted this year. [The Economist]
- VCs are abandoning supply chain tech—except for startups that can cut out the human. [Business Insider]
If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team. | | | | | |
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Highlights from our other recent research:
Market updates
Thematic research
Industry and technology research
Coming next week (subject to change) - US PE Middle Market Report
- Real Assets Report
- Impact Funds by Reason and Region
- Takeaways from Fortune's Brainstorm AI Conference
- ETR: Clean Energy Launch Report
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| A message from Pacific Western Bank | | |
| Flexible financing that grows with you | | PWB specializes in financial products and services built to support the evolving needs of startups, venture-backed businesses, and their VC & PE investors.
Ready to take your business to the next level?
Learn more here | | | | | | | |
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| | Since yesterday, the PitchBook Platform added: | | 319 Deals | 1624 People | 452 Companies | 22 Funds | | | | | | |
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